Commentary and Tracking of a Portfolio of Stocks using approach from "The Little Book that Beats the Market" by Joel Greenblatt aka Magic Formula Investing

Saturday, December 23, 2017

Multiple Year Holding of MFI Stocks

Multiple Year Holding of MFI Stocks

We have freezing rain here in CT today. Not going anywhere. Thought I'd start a study of multiple year holding for MFI stocks. I picked 4 years ago, Dec 31,2013 portfolio. Here are the fifty stocks and how they did in the first year:

Stock

12/31/2013

12/31/2014

1 year Change

Initial Market Cap

ATVI

$
17.66

$
20.15

14%

12,282

MO

$
36.64

$
49.27

34%

76,731

APOL

$
27.32

$
34.11

25%

3,083

AAPL

$
78.49

$
110.38

41%

498,632

AGX

$
26.97

$
33.64

25%

384

BAH

$
16.97

$
26.53

56%

2,721

BKE

$
49.14

$
52.52

7%

2,546

CA

$
32.54

$
30.45

-6%

15,034

CACI

$
73.22

$
86.18

18%

1,708

CHE

$
75.95

$
105.67

39%

1,356

CRUS

$
20.43

$
23.57

15%

1,304

CSCO

$
21.74

$
27.82

28%

119,661

COH

$
54.24

$
37.56

-31%

15,813

CRTX

$
9.49

$
9.48

0%

252

DLX

$
51.10

$
62.25

22%

2,625

DHX

$
7.25

$
10.01

38%

418

EBIX

$
14.43

$
16.99

18%

566

EGL

$
33.40

$
42.80

28%

578

GME

$
47.68

$
33.80

-29%

5,725

GTIV

$
12.41

$
19.05

54%

392

GNI

$
43.87

$
13.90

-68%

105

HLF

$
78.35

$
37.70

-52%

7,893

IQNT

$
11.07

$
19.63

77%

366

ESI

$
33.58

$
9.61

-71%

778

LPS

$
37.38

$
37.30

0%

3,192

LQDT

$
22.66

$
8.17

-64%

694

LO

$
48.55

$
62.94

30%

18,697

MSFT

$
36.41

$
46.45

28%

311,222

MYGN

$
20.98

$
34.06

62%

1,789

NATR

$
15.21

$
14.82

-3%

281

NOC

$
112.18

$
147.39

31%

25,495

PDLI

$
7.89

$
7.71

-2%

1,436

PFMT

$
10.30

$
6.65

-35%

506

PETS

$
15.80

$
14.37

-9%

333

PRSC

$
25.72

$
36.44

42%

343

QCOR

$
53.77

$
93.60

74%

3,294

RTN

$
89.03

$
108.17

21%

28,890

RAI

$
47.78

$
64.27

35%

26,932

RPXC

$
16.90

$
13.78

-18%

923

SAIC

$
32.17

$
49.53

54%

1,589

SWHC

$
13.49

$
9.47

-30%

753

STRA

$
34.47

$
74.28

115%

381

RGR

$
71.03

$
34.63

-51%

1,397

UIS

$
33.57

$
29.48

-12%

1,475

UNTD

$
13.76

$
14.55

6%

182

SPOK

$
14.04

$
17.36

24%

316

USNA

$
75.58

$
102.59

36%

1,083

VCI

$
34.25

$
34.00

-1%

1,319

VGR

$
14.48

$
21.31

47%

1,558

WTW

$
32.93

$
24.84

-25%

1,874

Solid first year, up 12.7% versus 11.9% for benchmark.

Stock

12/31/2013

12/31/2015

2 year Change

Initial Market Cap

ATVI

$
17.66

$
38.16

116%

12,282

MO

$
36.64

$
54.66

49%

76,731

APOL

$
27.32

$
7.67

-72%

3,083

AAPL

$
78.49

$
101.34

29%

498,632

AGX

$
26.97

$
31.36

16%

384

BAH

$
16.97

$
29.65

75%

2,721

BKE

$
49.14

$
26.14

-47%

2,546

CA

$
32.54

$
26.77

-18%

15,034

CACI

$
73.22

$
92.78

27%

1,708

CHE

$
75.95

$
147.88

95%

1,356

CRUS

$
20.43

$
29.53

45%

1,304

CSCO

$
21.74

$
25.34

17%

119,661

COH

$
54.24

$
32.73

-40%

15,813

CRTX

$
9.49

$
9.48

0%

252

DLX

$
51.10

$
52.58

3%

2,625

DHX

$
7.25

$
9.17

26%

418

EBIX

$
14.43

$
32.42

125%

566

EGL

$
33.40

$
32.48

-3%

578

GME

$
47.68

$
24.77

-48%

5,725

GTIV

$
12.41

$
17.25

39%

392

GNI

$
43.87

$
8.10

-82%

105

HLF

$
78.35

$
53.62

-32%

7,893

IQNT

$
11.07

$
17.77

61%

366

ESI

$
33.58

$
3.73

-89%

778

LPS

$
37.38

$
34.00

-9%

3,192

LQDT

$
22.66

$
6.50

-71%

694

LO

$
48.55

$
77.27

59%

18,697

MSFT

$
36.41

$
52.82

45%

311,222

MYGN

$
20.98

$
43.16

106%

1,789

NATR

$
15.21

$
9.66

-36%

281

NOC

$
112.18

$
183.09

63%

25,495

PDLI

$
7.89

$
3.43

-56%

1,436

PFMT

$
10.30

$
1.79

-83%

506

PETS

$
15.80

$
16.07

2%

333

PRSC

$
25.72

$
46.92

82%

343

QCOR

$
53.77

$
93.00

73%

3,294

RTN

$
89.03

$
119.44

34%

28,890

RAI

$
47.78

$
92.30

93%

26,932

RPXC

$
16.90

$
10.96

-35%

923

SAIC

$
32.17

$
44.01

37%

1,589

SWHC

$
13.49

$
21.98

63%

753

STRA

$
34.47

$
59.42

72%

381

RGR

$
71.03

$
56.59

-20%

1,397

UIS

$
33.57

$
11.05

-67%

1,475

UNTD

$
13.76

$
11.79

-14%

182

SPOK

$
14.04

$
17.06

22%

316

USNA

$
75.58

$
63.88

-15%

1,083

VCI

$
34.25

$
24.76

-28%

1,319

VGR

$
14.48

$
17.85

23%

1,558

WTW

$
32.93

$
22.80

-31%

1,874

12%

Wow, year 2 sucked, essentially flat. Actually, not a terrible suck as Russell 3000 was basically flat for 2015 (how quickly we forget). Note I am sure I have missed some dividends => this is quick and dirty. Also several companies at this point have been bought: VCI, LO, GTIV, QCOR, CRTX and LPS. Also GNI has been dissolved.

Let us now look at year 3 totals.

Stock

12/31/2013

12/31/2016

3 year Change

Initial Market Cap

ATVI

$
17.66

$
35.89

103%

12,282

MO

$
36.64

$
65.84

80%

76,731

APOL

$
27.32

$
9.80

-64%

3,083

AAPL

$
78.49

$
113.99

45%

498,632

AGX

$
26.97

$
69.50

158%

384

BAH

$
16.97

$
35.38

108%

2,721

BKE

$
49.14

$
20.87

-58%

2,546

CA

$
32.54

$
30.78

-5%

15,034

CACI

$
73.22

$
124.30

70%

1,708

CHE

$
75.95

$
159.54

110%

1,356

CRUS

$
20.43

$
56.54

177%

1,304

CSCO

$
21.74

$
29.18

34%

119,661

COH

$
54.24

$
35.02

-35%

15,813

CRTX

$
9.49

$
9.48

0%

252

DLX

$
51.10

$
70.39

38%

2,625

DHX

$
7.25

$
6.25

-14%

418

EBIX

$
14.43

$
56.77

293%

566

EGL

$
33.40

$
33.70

1%

578

GME

$
47.68

$
23.51

-51%

5,725

GTIV

$
12.41

$
17.25

39%

392

GNI

$
43.87

$
8.10

-82%

105

HLF

$
78.35

$
48.14

-39%

7,893

IQNT

$
11.07

$
22.92

107%

366

ESI

$
33.58

$ -

-100%

778

LPS

$
37.38

$
34.00

-9%

3,192

LQDT

$
22.66

$
9.75

-57%

694

LO

$
48.55

$
77.27

59%

18,697

MSFT

$
36.41

$
60.78

67%

311,222

MYGN

$
20.98

$
16.67

-21%

1,789

NATR

$
15.21

$
14.85

-2%

281

NOC

$
112.18

$
229.23

104%

25,495

PDLI

$
7.89

$
2.12

-73%

1,436

PFMT

$
10.30

$
2.35

-77%

506

PETS

$
15.80

$
22.52

43%

333

PRSC

$
25.72

$
38.05

48%

343

QCOR

$
53.77

$
93.00

73%

3,294

RTN

$
89.03

$
139.96

57%

28,890

RAI

$
47.78

$
112.08

135%

26,932

RPXC

$
16.90

$
10.76

-36%

923

SAIC

$
32.17

$
83.39

159%

1,589

SWHC

$
13.49

$
21.08

56%

753

STRA

$
34.47

$
79.69

131%

381

RGR

$
71.03

$
51.41

-28%

1,397

UIS

$
33.57

$
14.95

-55%

1,475

UNTD

$
13.76

$
11.00

-20%

182

SPOK

$
14.04

$
20.15

43%

316

USNA

$
75.58

$
61.20

-19%

1,083

VCI

$
34.25

$
24.76

-28%

1,319

VGR

$
14.48

$
20.43

41%

1,558

WTW

$
32.93

$
11.45

-65%

1,874

29%

Up about 17% year over year. The Russell 3000 was up 12.5%, so a solid result, even with the 6 stocks bought out. And two more disappeared this year, UNTD and IQNT were bought and ESI went bankrupt. We are certainly making a solid case for buy and hold. But let us now see how 2017 has treated this portfolio as we know MFI has struggled this year.

Stock

12/31/2013

12/22/2017

4 year Change

Initial Market Cap

ATVI

$
17.66

$
64.51

265%

12,282

MO

$
36.64

$
72.14

97%

76,731

APOL

$
27.32

$
10.00

-63%

3,083

AAPL

$
78.49

$
175.01

123%

498,632

AGX

$
26.97

$
45.55

69%

384

BAH

$
16.97

$
38.72

128%

2,721

BKE

$
49.14

$
23.90

-51%

2,546

CA

$
32.54

$
33.52

3%

15,034

CACI

$
73.22

$
134.10

83%

1,708

CHE

$
75.95

$
242.41

219%

1,356

CRUS

$
20.43

$
52.38

156%

1,304

CSCO

$
21.74

$
38.55

77%

119,661

COH

$
54.24

$
44.38

-18%

15,813

CRTX

$
9.49

$
9.48

0%

252

DLX

$
51.10

$
76.01

49%

2,625

DHX

$
7.25

$
1.90

-74%

418

EBIX

$
14.43

$
79.70

452%

566

EGL

$
33.40

$
28.36

-15%

578

GME

$
47.68

$
18.29

-62%

5,725

GTIV

$
12.41

$
17.25

39%

392

GNI

$
43.87

$
8.10

-82%

105

HLF

$
78.35

$
69.59

-11%

7,893

IQNT

$
11.07

$
23.00

108%

366

ESI

$
33.58

$ -

-100%

778

LPS

$
37.38

$
34.00

-9%

3,192

LQDT

$
22.66

$
4.75

-79%

694

LO

$
48.55

$
77.27

59%

18,697

MSFT

$
36.41

$
85.51

135%

311,222

MYGN

$
20.98

$
34.23

63%

1,789

NATR

$
15.21

$
12.00

-21%

281

NOC

$
112.18

$
303.78

171%

25,495

PDLI

$
7.89

$
2.91

-63%

1,436

PFMT

$
10.30

$
1.64

-84%

506

PETS

$
15.80

$
45.64

189%

333

PRSC

$
25.72

$
58.64

128%

343

QCOR

$
53.77

$
93.00

73%

3,294

RTN

$
89.03

$
187.31

110%

28,890

RAI

$
47.78

$
118.87

149%

26,932

RPXC

$
16.90

$
13.74

-19%

923

SAIC

$
32.17

$
77.31

140%

1,589

SWHC

$
13.49

$
13.00

-4%

753

STRA

$
34.47

$
92.59

169%

381

RGR

$
71.03

$
55.20

-22%

1,397

UIS

$
33.57

$
8.30

-75%

1,475

UNTD

$
13.76

$
11.00

-20%

182

SPOK

$
14.04

$
15.95

14%

316

USNA

$
75.58

$
74.85

-1%

1,083

VCI

$
34.25

$
24.76

-28%

1,319

VGR

$
14.48

$
22.34

54%

1,558

WTW

$
32.93

$
50.52

53%

1,874

49%

So up another 20%. I have largely excluded dividends, plus we can add RAI to list of companies bought (and ironically they bought LO). So I suspect if we added in dividends and gave some reinvestment for sold companies we would be pushing 55% over the 4 years. The R3K is up 53% in the same four years. So interestingly, MFI is hanging in there. My MFI Index is up just 25% in that stretch... so the churning (reconstitution every year) has not been adding and value.

Might be interesting to look at a couple more stats.

What if you just split these 50 stocks by market cap and went with 25 largest?

That takes the 49% aggregate for all 50 to 62% for the 25 largest.

What if you just picked the stocks that had my dividend flag (initial yield of 2.6% or greater)?

Stock

12/31/2013

12/22/2017

Div Flag

4 year Change

Initial Market Cap

MO

$
36.64

$
72.14

1

97%

76,731

AAPL

$
78.49

$
175.01

1

123%

498,632

AGX

$
26.97

$
45.55

1

69%

384

BAH

$
16.97

$
38.72

1

128%

2,721

BKE

$
49.14

$
23.90

1

-51%

2,546

CA

$
32.54

$
33.52

1

3%

15,034

CSCO

$
21.74

$
38.55

1

77%

119,661

GNI

$
43.87

$
8.10

1

-82%

105

IQNT

$
11.07

$
23.00

1

108%

366

LO

$
48.55

$
77.27

1

59%

18,697

MSFT

$
36.41

$
85.51

1

135%

311,222

NATR

$
15.21

$
12.00

1

-21%

281

PDLI

$
7.89

$
2.91

1

-63%

1,436

PETS

$
15.80

$
45.64

1

189%

333

RAI

$
47.78

$
118.87

1

149%

26,932

RGR

$
71.03

$
55.20

1

-22%

1,397

UNTD

$
13.76

$
11.00

1

-20%

182

SPOK

$
14.04

$
15.95

1

14%

316

VCI

$
34.25

$
24.76

1

-28%

1,319

VGR

$
14.48

$
22.34

1

54%

1,558

46%

At first glance not great. But recall I was lazy on dividends here. So that would add at least 2.6 points over 3 years (I only did first year). So that means dividend flag out-performed no dividend flag. And in my formula approach I threw out PDLI all the time as they were a melting ice cube. I would have tossed GNI for same reason. That then pushes you north of 60%.

Now let us also look at the ten worst stocks overall:

Stock

12/31/2013

12/22/2017

4 year Change

Initial Market Cap

ESI

$
33.58

$ -

-100%

778

PFMT

$
10.30

$
1.64

-84%

506

GNI

$
43.87

$
8.10

-82%

105

LQDT

$
22.66

$
4.75

-79%

694

UIS

$
33.57

$
8.30

-75%

1,475

DHX

$
7.25

$
1.90

-74%

418

APOL

$
27.32

$
10.00

-63%

3,083

PDLI

$
7.89

$
2.91

-63%

1,436

GME

$
47.68

$
18.29

-62%

5,725

BKE

$
49.14

$
23.90

-51%

2,546

Recall I like to throw out stocks that don't have sustainable earnings. I'd like to think I'd have caught PDLI and GNI. But two retailers and two For Profit education I would have likely considered. PFMT and LQDT both depended on large contracts with the Govt that were lost. UIS has negative net worth and a pension hole very very deep. Not sure if there are lessons here, especially after reading the contrarian chapter in Deep Value.

Summary

Thanks for sticking this far. To summarize I looked at 50 MFI stocks from 4 years ago and tracked how they have fared year to year.

9 of 50 were bought out/merged.

2 disappeared with bankruptcy or dissolved.

Overall results were on par with Russell 3000 (about +55%). This despite MFI Index only be up 25% in same stretch.

If you bifurcate list by market cap, the larger market caps did significantly better.

If you bifurcate by dividend flag (initial yield 2.6% or greater) it was largely a push.

Holding for 4 years does not seem to be a bad strategy (using one sample point).

Addendum

After I wrote this, I adjusted for a few errors. USNA had a 2:1 split I missed. EGL had a $11 special dividend. BKE has had about $6 of special dividends.

That improved the 4 year chart by about 4 points:

Stock

12/31/2013

12/22/2017

4 year Change

Initial Market Cap

ATVI

$
17.66

$
64.51

265%

12,282

MO

$
36.64

$
72.14

97%

76,731

APOL

$
27.32

$
10.00

-63%

3,083

AAPL

$
78.49

$
175.01

123%

498,632

AGX

$
26.97

$
45.55

69%

384

BAH

$
16.97

$
38.72

128%

2,721

BKE

$
49.14

$
29.90

-39%

2,546

CA

$
32.54

$
33.52

3%

15,034

CACI

$
73.22

$
134.10

83%

1,708

CHE

$
75.95

$
242.41

219%

1,356

CRUS

$
20.43

$
52.38

156%

1,304

CSCO

$
21.74

$
38.55

77%

119,661

COH

$
54.24

$
44.38

-18%

15,813

CRTX

$
9.49

$
9.48

0%

252

DLX

$
51.10

$
76.01

49%

2,625

DHX

$
7.25

$
1.90

-74%

418

EBIX

$
14.43

$
79.70

452%

566

EGL

$
33.40

$
39.36

18%

578

GME

$
47.68

$
18.29

-62%

5,725

GTIV

$
12.41

$
17.25

39%

392

GNI

$
43.87

$
8.10

-82%

105

HLF

$
78.35

$
69.59

-11%

7,893

IQNT

$
11.07

$
23.00

108%

366

ESI

$
33.58

$ -

-100%

778

LPS

$
37.38

$
34.00

-9%

3,192

LQDT

$
22.66

$
4.75

-79%

694

LO

$
48.55

$
77.27

59%

18,697

MSFT

$
36.41

$
85.51

135%

311,222

MYGN

$
20.98

$
34.23

63%

1,789

NATR

$
15.21

$
14.00

-8%

281

NOC

$
112.18

$
303.78

171%

25,495

PDLI

$
7.89

$
2.91

-63%

1,436

PFMT

$
10.30

$
1.64

-84%

506

PETS

$
15.80

$
45.64

189%

333

PRSC

$
25.72

$
58.64

128%

343

QCOR

$
53.77

$
93.00

73%

3,294

RTN

$
89.03

$
187.31

110%

28,890

RAI

$
47.78

$
118.87

149%

26,932

RPXC

$
16.90

$
13.74

-19%

923

SAIC

$
32.17

$
77.31

140%

1,589

SWHC

$
13.49

$
13.00

-4%

753

STRA

$
34.47

$
92.59

169%

381

RGR

$
71.03

$
55.20

-22%

1,397

UIS

$
33.57

$
8.30

-75%

1,475

UNTD

$
13.76

$
11.00

-20%

182

SPOK

$
14.04

$
15.95

14%

316

USNA

$
75.58

$
149.70

98%

1,083

VCI

$
34.25

$
24.76

-28%

1,319

VGR

$
14.48

$
22.34

54%

1,558

WTW

$
32.93

$
50.52

53%

1,874

53%

So with reinvestment of dead money and "normal dividends" I think this approach is now bumping against 60% for the 4 years. So a beat (by a slight amount) of Russell 3000.